Bond Issue Questions
Every two years, the City of Baltimore must get permission from voters through a ballot referendum to issue General Obligation Bonds (GO Bonds). GO bonds are borrowed funds that are used for capital projects, including housing and neighborhood revitalization; school renovations and improvements; economic development; improvements to City parks, recreation centers, and other government facilities; and key City institutions and cultural attractions. GO bonds make up a small but important part of the City’s capital budget. They allow the City the flexibility to fund priorities, particularly for projects and items for which there are no other fund sources available.
Issuing GO bonds to pay for capital projects is a common practice across cities in the United States. Because this type of bond is backed by the full faith and credit of a city, meaning that the city will use its taxing authority to repay the bonds in the unlikely event of a default, voters are often asked to vote to authorize a city to issue GO bonds through questions on the general election ballot. The questions are sometimes referred to as loan authorizations, as voters are authorizing the City to issue debt that will be paid back over time. Each bond issue question refers to a “loan” dedicated to a specific purpose, described further below.
In 2018, the Mayor’s Office and Department of Finance are proposing to increase the loan amount from $65 million to $80 million, subject to approval by the voters. The increase will allow the City to increase its commitment to City school buildings and affordable housing, while also addressing deferred maintenance on its infrastructure. Click here for more detail on Baltimore City’s approach to issuing GO bonds, and review the loan questions below to learn more about the different categories of loan that you can expect to see on the 2018 ballot.
Question A: Affordable Housing Loan
$10 million over 2 years
New in 2016, the Affordable Housing Loan set aside funds exclusively to be used for affordable housing. Eligible uses would include acquisition, preservation, production of new housing, demolition, rental assistance, housing counseling and project finance comprised of loans (including forgivable or fully amortizing) or grants as well as other related activities. In 2016, voters approved $3 million per year ($6 million total) for this loan. In 2018, the proposed program includes $5 million per year ($10 million total) for this loan. This loan complements many other Affordable Housing fund sources, including Community Development Block Grants, Low Income Housing Tax Credits, housing vouchers, and City general funds.
Question B: Schools Loan
$38 million over 2 years
Baltimore City Public Schools, the City of Baltimore, the State of Maryland, and the Maryland Stadium Authority are partnering to implement the 21st Century Schools initiative, a nearly billion dollar initiative to renovate or replace 23-28 school buildings through a combination of other funding sources. This loan authorization will complement that investment by making critical systemic improvements, such as fire alarms, HVAC systems, and other urgent needs in schools that are not currently funded through the 21st Century Schools Initiative. This loan authorization will also allow renovation and replacement of additional schools to take place, leveraging traditional State capital support through the Maryland Public Schools Construction Program. In addition, this loan authorization will allow for renovation or demolition of former school buildings that are declared surplus through the 21st Century Schools Initiative. In 2018, the proposed program includes $19 million per year ($38 million total) for this loan. The $19 million City contribution is used to match approximately $30-35 million in State funding through the Public School Construction Program for improvements to school buildings outside of the 21st Century Schools initiative.
Question C: Community and Economic Development Loan
$47 million over 2 years
Baltimore is committed to supporting and promoting efforts to revitalize and stabilize neighborhoods and support investment that retains and attracts jobs in the City and increases tax revenues. Community and Economic Development funds will be used to attract and retain residents, jobs, and other investment. This loan will be used to eliminate blight through strategic whole block demolition; provide financing and incentives for private investment; and improve the appearance of commercial and industrial areas. In 2016, voters approved $22.5 million per year ($45 million total) for this loan. In 2018, the proposed program includes $23.5 million per year ($47 million total) for this loan.
Question D: Recreation, Parks and Public Facilities Loan
$65 million over 2 years
The Recreation, Parks, and Public Facilities Loan provides critical funds for upgrades to neighborhood amenities like parks, recreation centers, and libraries, along with the buildings that allow city government to operate, such as courthouses, city office buildings, and fire stations. The last major wave of investment in Baltimore’s public facilities was in the 1970s. Many of these facilities are physically decayed and now in need of major renovations or replacements. In addition, the best practices for providing various public services have changed dramatically during this time. This loan can also be used for critical information technology infrastructure. In 2016, voters approved $22.5 million per year ($45 million total) for this loan. In 2018, the proposed program includes $32.5 million per year ($65 million total) for this loan. There are relatively few other fund sources available for City buildings and information technology projects, making GO bonds an extremely important fund source for these types of projects.
For more information, please contact Kristen Ahearn at (410) 396-8357 or [email protected].
Additional Background on Baltimore's G.O. Bonds:
In recent years, Baltimore City has been conservative in issuing G.O. bonds. Based on a debt study conducted in 2012, the consultant stated the City could issue up to $80 million in G.O. bonds each year while maintaining a stable financial position and bond rating. In response to the study, the Director of Finance elected to increase the annual authorization to $65 million beginning in 2014. During this same year the City’s bond rating was increased by Standard and Poor’s so that the City’s ratings now stand at Aa2 and AA by Moody’s and Standard and Poor’s rating services. These ratings reflect a sound financial condition allowing the City to enjoy very affordable interest rates on the City’s general obligation debt. In 2018, voters will be asked to authorize $80 million in G.O. bonds per year for fiscal years 2020 and 2021, consistent with the City’s debt policy.